Three former AT&T employees are being sued by AT&T for an illegal unlocking scheme in which they made thousands of dollars by unlocking contract-bound phones.
Three former AT&T employees are on the hook with their former employer for unlocking contract-bound phones. The employees have been said to be in cohorts with Swift Unlocks, a company that specializes in unlocking smartphones. AT&T laws are very explicit against unlocking smartphones that are tied to contracts or two-year agreements except in cases of the military, for instance.
Once a customer’s two-year agreement ends, he or she is free to get their smartphone (now out of contract) unlocked by AT&T to take to T-Mobile if they wish. Until the 2-year-agreement is fulfilled, customers are not allowed to have their phones unlocked on the carrier’s network. These former employees decided not to play by the rules, unlocking smartphones that were prohibited by carrier statutes and regulations.
The three former employees who worked for the carrier in Washington State did so out of financial motive. For all the work they did to quickly unlock customer smartphones (by hacking into AT&T’s network), the three employees in question gained somewhere between $10,000 and $20,000 in illegal profit. Included in the lawsuit between AT&T and these former employees is also Swift Unlocks, who played an intentional role in the carrier hacking scheme.
AT&T, like all carriers, locks its customers into two-year agreements on its network in order to ensure that the carrier receives its profit from customers who sign contracts. While off-contract plans are gaining steam, many consumers in the past have signed two-year agreements because of the financial gain of paying only $199 up-front with a two-year agreement for the latest and greatest high-end smartphones.
Contracts require that consumers pay a monthly fee, and the cost of the device is not subsidized by the carrier (meaning, no retail price discounts apply). Take Verizon, for example: while T-Mobile has charged $700+ for the Galaxy S5 from last year, Verizon offered the same device for $599 initially. Even the Galaxy Note5 will cost over $800 at AT&T but $696 at Verizon ($29 monthly for 24 months). AT&T prices its smartphones at the top of the Big Four, with every high-end Samsung smartphone costing over $800, which seems rather exorbitant when compared to the more modest pricing of T-Mobile and Verizon.
Customers often have their smartphones unlocked to take them to other networks, and the guilty employees who did this allowed customers to use their phones on other networks without paying the agreed-upon fees stipulated in customer two-year agreements.
If convicted, the former AT&T employees will have to return not only the illegal profit they made from the scheme but also the lost profit from customers due to the illegal scheme. The lesson to be learned from this is that it pays not to disobey carrier rules; more importantly, it pays to not be an AT&T employee who disobeys carrier rules.